Con­ti­nent of prom­ise and peril

With deep in­ef­fi­cien­cies and illiq­uid shares, Africa re­quires a longer-term com­mit­ment than most other mar­kets

Financial Mail - - MONEY&INVESTING - Stephen Cranston cranstons@fm.co.za

Re­silient Reit

Fi­nan­cial ad­vis­ers and pen­sion fund trustees should re­con­sider their ex­po­sure to coun­tries else­where in Africa now that pen­sion fund mem­bers may in­crease their max­i­mum al­lo­ca­tion to this re­gion to 10%.

With a range of highly in­ef­fi­cient mar­kets and illiq­uid shares to choose from, there is still a strong case for ac­tive man­age­ment of African fron­tier funds.

And 2017 was a par­tic­u­larly strong year for the con­ti­nent. The Lau­rium Lim­popo African Eq­uity Fund, for ex­am­ple, pro­vided a 48% re­turn. Mar­kets were com­ing off a low base, with a de­val­u­a­tion of about 50% in the Egyp­tian pound and the Nige­rian naira in 2016.

“The pos­i­tive trend con­tin­ued in the first quar­ter of 2018,” says Lau­rium fund man­ager Paul Robin­son, “but it turned neg­a­tive again in May as in­vestors sold out of emerg­ing and fron­tier mar­kets.”

He says the de­mands on MTN for ex­tra tax pay­ments by the Cen­tral Bank of Nige­ria did not help: MTN Nige­ria was the most keenly ex­pected IPO of the year and it has been post­poned in­def­i­nitely.

But Egypt has a strong IPO pipe­line. Re­cently listed Obour Land is a favourite of most fund man­agers as it pro­duces spread­able feta cheese, the sta­ple source of pro­tein in the mass mar­ket. And Cira, a prop­erty de­vel­oper in Egypt that builds and man­ages schools — a hy­brid of Bal­win Prop­er­ties and Ad­vtech — has added an­other op­tion to the uni­verse.

Fun­gai Tari­rah, man­ager of the Sand­ton­based Ru­di­ar­ius BCI Africa Eq­uity Fund, says many African coun­tries have put the right re­forms in place. Egypt has dropped all sub­si­dies ex­cept for bu­tane — the main fuel used by the poor — and Kenya has built a sin­gle-gauge rail­way from Nairobi to the sea with Chi­nese

Rus­sell Roberts

Keillen Ndlovu: Ex­pects a ‘mod­est’ re­cov­ery in prop­erty share prices over the next 12 months

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